When most people think about their online KPIs, they tend to think about website traffic – how many people are coming to my site? While traffic is definitely an important metric to understand and improve, it’s not worth any money to your company – at least not on its own.
Instead, you also need to understand your ecommerce-specific KPIs.
Otherwise, you risk spending lots of time and money on increasing traffic but having little else to show for it.
10 Ecommerce Specific KPIs You Need to Begin Tracking Right Now
Every company is going to have slightly different KPIs they decide to track based on their industry and unique business goals.
However, every single company should track the following 10 to see better ecommerce results.
1. Conversion Rate
Arguably, there is no KPI more important to the success of your company than its conversion rate.
Simply put, this is the percentage of shoppers who take a desired action.
The most common example of a conversion rate is how many visitors your website converts into customers. Another would be how many people see your ad – on a SERP, website, or social media platform – and convert by clicking on it.
If you don’t know your conversion rates, you really have no idea how successful your various marketing efforts are.
For example, say you know that your website attracts 10,000 visitors a month.
That’s an impressive number, but if your conversion rate is 0, it represents little more than a large sum of wasted money.
On the other hand, maybe your website only brings in about 500 visitors a month, but you manage to convert every single one of them. In that case, your money is well spent.
In many ways, your conversion rate is a holistic measurement of the health of your marketing efforts. The more you improve every factor involved – from your copy to your PPC ads to your SEO – the better your conversion rate will be.
2. Cost-of-Sale Percentage
This KPI shows you how much you are spending to earn a sale for a specific product in your inventory.
Your cost-of-sale percentage is an important KPI because it shows you which products are producing the largest profits and which are responsible for much slimmer margins.
If two products are providing you with $10,000 a month, they may appear to deserve the same attention from your budget.
However, if you’re spending a total of $1,000 for one and a total of $5,000 for the other, it should be clear where the greater opportunity lies.
3. Estimated Cost-of-Sale
We’ve talked about the estimated cost-of-sale on this blog before because, even though it sounds similar to the last KPI, it’s not the same thing and actually entails a very important difference.
As the word “estimated” identifies, this percentage is for non-converted items. It gives you a reliable predictor for what your true cost-of-sale will be, assuming you earn one on the next click.
Why would you want to know this?
Because this information can help you make decisions to improve your efforts before spending any more money.
If your profit margins become too small, it may not be worth trying to sell a certain product – at least not until you have the opportunity to review your approach.
For example, let’s say that your estimated cost-of-sale is climbing because you’re attracting clicks with your ads, but no one is actually buying. At some point, another click is going to mean your sale will no longer be profitable.
If you see this coming, you can pull the product from your feed and retool your approach before losing any more money.
4. Average Order Value
It probably goes without saying that you want as much value as possible from every purchase your customers make. If you can move your average order value from $100 to $200, you will double your profits without actually needing to make more sales.
Fortunately, it’s also a very straightforward KPI. Just take your monthly revenues and divide that number by the total sales you made.
Once you know what your average order value is, there are a number of tactics you can implement to improve it, including:
- Upselling
- Selling Product Bundles
- Discounting Minimum Order Thresholds
5. Return on Ad Spend
Assuming your company has some kind of ad spend, this KPI is a requirement for optimizing how those dollars are spent.
Your return on advertising spend measures the effectiveness of your advertising campaigns.
Calculate it by taking how much you spend on ads for a given month and dividing it by your revenues. So, if you spent $1,000 on your digital ads last month and earned $5,000, your return is a ration of 5:1 or 500%.
This number should inform how you allocate your budget. By analyzing your returns by channel, you’ll know which ones should see higher spends and which should be reassessed as an option.
6. Average Cost-Per-Click
This KPI tells you the average price you’re paying for someone to click on an ad, listing, button, etc.
It’s vital that you keep an eye on your cost-per-click because this number can quickly cut into your profits.
This is also where your cost-of-sale percentage comes in. If you’re paying $1 per click, but it takes 50 clicks before you make a sale, that’s already $50 coming out of your revenue.
Keep in mind, too, that your cost-per-click can tell you a lot about your strategy. If clicks coming from a certain keyword or customer segment are costing you less than others, that could be a major opportunity.
7. Cost-Per-Acquisition
Cost-per-click is important, but you also need to know your cost-per-acquisition. This is how much it’s costing you to acquire a customer and get them to buy your products.
Cost-per-acquisition is not the same as your cost-of-sale. The latter pertains solely to each product you’re selling, whereas the former is about what it costs you to turn a lead into a customer.
If you’re selling on multiple sites, you need to compare your cost-per-acquisition across all of them to see which are doing a better job than others.
8. Shopping Cart Abandonment
Your website’s shopping cart abandonment rate represents one of your biggest opportunities to improve your conversion rates without having to spend the kind of time or money that this result often requires.
If a visitor took the time to come to your site, peruse your items, and add one or more to a virtual cart, it’s probably a pretty good bet that they’re going to become a customer.
Unfortunately, this doesn’t always happen. Your shopping cart abandonment rate refers to the percentage of the time visitors reach that last step just before clicking “purchase” only to leave your site instead.
The reason this KPI is so significant is because you’re almost there. Everything else in your funnel has successfully brought a lead to your site. One tiny fix may be all it takes to immediately improve your conversion rate.
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9. Customer Lifetime Value
Imagine if you knew how much value you would derive from your average customer over their entire lifetime.
This is their customer lifetime value and many companies build their entire business plans and design their corporate culture around this one KPI.
After all, attracting a customer is great, but if you can get them to order from you again and again and you can increase the value of each order, then the ROI on your acquisition cost is going to skyrocket.
By becoming more valuable to your customers, you stand a much better chance of increasing how valuable they will continue to be to your company. Businesses that miss this key insight tend to focus on only trying to acquire new customers, which means missing out on the goldmine their existing base represents.
10. Revenue
Finally, no discussion about ecommerce-related KPIs would be complete without talking about revenue.
As you probably already know, your company’s revenue is the amount of money it earns.
Now, that said, it’s not necessarily an important KPI for that reason. That’s because massive overhead could drop an impressive annual revenue to something much more modest.
The reason why it’s important to monitor your revenue is because it shows you just how much potential your company has.
For example, if you are earning $10 million every year, but you see that your shopping cart abandonment rate is costing you $500,000, it should be clear where you need to place some focus.
Likewise, maybe you’re already keeping a large percentage of your revenue. In that case, it’s probably time to focus on increasing your average order cost or customer lifetime value.
Your revenue should never be taken as a sign of health in and of itself. Instead, it’s a measuring stick you can use to gauge your other efforts.
Monitoring These KPIs Is Key to Your Success
It’s not an exaggeration to say that your level of success largely depends on how well you monitor and act on your ecommerce-specific KPIs. Your ability to do this can actually turn into a major competitive advantage.
Now that you know what they are, the next step is to pick one that needs the most help and prioritize its improvement. If you continue doing so, it won’t be long before your company’s bottom line is far better than you’ve ever seen it.
